Consolidated Audit Trail Still a Few Years Away, Liquidnet’s Sussman Says


While still subject to debate, cost analysis and acceptance by myriad industry participants, the consolidated audit trail won’t begin construction until 2017 and be in operation until 2019 at the earliest.

That’s according to Adam Sussman, head of market structure at dark pool and block-trade focused Liquidnet. While the CAT is indeed coming to the U.S. equity marketplace as the single trade-data reporting system, he sees more debate and hurdles to clear before implementation.

“This is a classic example of the glass half-full or half-empty,” Sussman told Markets Media. “The half-empty side of it is that the CAT is taking too long and it’s too slow. Also, it’s not clear to me whether (regulators) will still have the necessary data components to get down to the nitty-gritty of seeing the market clearly.”

Continued Sussman, “the half-full part is once CAT is completed, the Securities and Exchange Commission will have more data available in order to at least begin to conduct some kind of investigation into a disruptive market event and/or be able to take a more nuanced to view on measuring market quality.”

CAT critics say it doesn’t go far enough, or the system could be obsolete by the time it’s live. But, “markets would be better off having it on the whole, which is more than you can say for some regulations,” Sussman said.

Sussman noted the process of selecting a CAT builder has been long, but the thoroughness is in the market’s best interests and the SEC’s decision to leverage technology from market vendors makes sense.

The hardest part of the CAT proposal may be behind the market. “To some extent, the process just to get to rule done and the bidding process started was definitely would be the longest part of the process,” he said. “I don’t think from a technology perspective it will be overly complicated.”

With that time horizon, and given the fact the ‘Flash Crash” happened in 2010, the question of whether or not the system would be obsolete before its first trade report, Sussman wasn’t sure. He did say that it really depends on the amount of flexibility that is built into the system and how quickly it can be modified or adjusted to accommodate for such things as new data points or more granular data.

“Part of the challenge is going to be how rigid is it going to be in terms of the data that they’re able to collect or add,” Sussman said. “If they decided they need another level of data, how quickly are they going to be able to change the system? Let’s assume the data exists within the pipes but it maybe wasn’t built into the spec on day one. Is that going to require a rule change? I would assume this won’t be the fastest system in terms of its ability to change but I don’t think it’s inherently obsolete on Day One. We’ll have to see how many people are going to be needed to sign off on a change in order to determine its flexibility and obsolescence.”

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